Malta's EU budget allocation stands to avoid being cut in spite of a UK presidency proposal to slash 8.5 per cent from the new member states' structural and cohesion funds.
The EU's UK presidency yesterday confirmed plans to cap the European budget for 2007-13 at €847 billion compared with a previous proposal of €871 billion but Malta is one of three new EU member states (along with Cyprus and Slovenia) whose budget allocation would remain unchanged from the one originally proposed by the Luxembourg presidency.
Malta had agreed to the financial perspectives put forward by Luxembourg.
Also, by changing the EU's matching funds rule, the newcomers would be able to invest more from 2007 without having to put up as much of their own cash.
Details of the proposal were presented by British High Commissioner to Malta Vincent Fean shortly after Foreign Secretary Jack Straw outlined his government's much anticipated proposals.
British Prime Minister Tony Blair hopes the package will end a standoff in the 25-nation bloc and make possible a deal at next week's European Council meeting. The proposals are however expected to face stern opposition.
Britain suggested cutting aid to the newcomers by €14 billion euros or 8.5 per cent over seven years compared to the compromise discussed at an EU summit in June, which ended in acrimony over Britain's refusal to give up its rebate and France's failure to give ground over the Common Agricultural Policy.
The British government yesterday suggested two options to meet its own share of enlargement costs, either paying an extra annual lump sum or foregoing part of its rebate on some aid to new member states.
Indeed, the proposal called for a review in 2008 of all EU spending and revenue, including the CAP and the rebate, which could lead to "adjustments" before 2013. Farm outlays, supported especially by the French, eat up about 40 per cent of the EU budget.
The UK proposed a lower ceiling on total EU spending than the European Commission insists is necessary to finance the expanded EU between 2007-2013.
Records show that every year member states have not been able to spend their full allocation for technical reasons but with the help of financial management arrangements countries would be able to avail themselves of their allocated funding in three years rather than two. Such a proposal would benefit Malta greatly, Sir Vincent envisaged. For the first time, EU funds may also be used for housing projects.
It was also proposed that the rate of national co-financing go down from 20 per cent to 15 per cent, a move which the High Commissioner said would boost Malta's budgetary cash flow.
The British presidency has also agreed to retain Malta's worded request that its "unique periphery and dense population would need to be negotiated".
Contacted last night, Prime Minister Lawrence Gonzi said the government would be studying in detail the UK proposals and reactions would be given later this week. He did not wish to give further comments.
Sir Vincent explained that in an ideal world, the UK would have liked to propose a more radical budget, focusing more on research and development rather than agriculture.
However, he said, it was a realistic proposal which should ensure that agreement is reached at next week's summit. Failure to do so would deepen the EU's crisis, already reeling from the French and Dutch voters' rejection of the EU constitution.
Key points of UK proposal
¤ Total budget of €847 billion over the period (reduction of €24 billion from the Luxembourg presidency)
¤ EU budget reduced from 1.06 per cent of EU output to 1.03 per cent. Spending goes below one per cent of EU gross national income by 2013
¤ 8.5 per cent cut (€14 billion) in funding to seven of 10 new member states
¤ €7 billion cut in rural development payments
¤ Cut in funds for EU bureaucracy
¤ Major review of all spending, including CAP, in 2008
¤ Countries may avail themselves of their allocated funding in three years rather than two
¤ Cut in UK rebate by €800 million a year